Canadian IT vendors are confused and outraged over a federal government request to cut the costs of public sector purchases of goods and services by 10 per cent, according to one of the industry’s largest associations.

Government Services Canada sent a letter to many of its suppliers on April 5 outlining changes to the way the government buys goods and services that were introduced in the 2005 budget. The letter, a copy of which was obtained by ITBusiness.ca, says PWGSC will be conducting a review of its overall strategy concerning supply arrangements, which is part of its goal of saving $2.5 billion over five years on purchasing goods and services.

“We are requesting that you review your pricing structure of ceiling per-diem rates,” the letter says. “We are seeking a reduction of prices paid, by 10 per cent over the range of services available.”

A spokesman for PWGSC said the department had met with Reid and other members of CATA before making its question and that the government will not force suppliers to lower their fees.

“This entirely voluntary and will have no impact on companies’ ability to do business with the government,” said Pierre Teotonio,. “Suppliers are free to make their own decision.”

Teotonio could not explain at press time, however, how PWGSC plans to measure the impact of the reduction, what items it will cover. PWGSC was seeking comments from the industry before April 13. but Teotonio was not aware what kind of response the government received.

“This is about more than generating savings,” the letter says. “It is about better accountability, increased transparency, demonstrating results and showing Canadians that they are getting value for their money — the fundamentals of good government.”

The Canadian Advanced Technology Alliance (CATA) has had a flood of calls over the issue, according to its president, John Reid. The association has been in conversations with PWGSC Minister Scott Brison for months but had heard nothing about the reduction, Reid said, and he said contacts within the CIO branch told him they were also unaware of it, nor were contacts at Industry Canada.

“It’s one thing to cut costs through a levy, it’s another thing to know how you measure the measurements of that cost cutting,” Reid said. “If you subtract any of the job loss, or business loss from that 10 per cent, what’s the net for Canada as an economy?”

Several IT suppliers contacted by ITBusiness.ca refused to comment on the government’s request. Reid said some have already cut the 10 per cent by trimming their marketing and education budgets, while others have refused to comply.

“The vendors don’t want to be identified. You’re concerned you’ll be seen as an outsider,” Reid said. “That really is the role of CATA. But I can tell you there’s been a tremendous number of responses from vendors.”

Previous attempts at federal procurement reform have rattled industry cages as well. Earlier this year, for example, Public Works backed off a controversial proposal to move to a model whereby small and medium-based vendors would have to work through a list of selected suppliers in order to take part in government contracts.

Reid said CATA has received no rationale for the 10 per cent reduction, and that no system was in place to properly repond to questions.

“If you’re in Ottawa, it becomes easier to understand and to have problems cleared up because of the proximity,” he said. “If you’re in British Columbia or Nova Scotia and you’re a vendor and you’re trying to understand what all this means . . . it just creates needless confusion in the marketplace.”

The letter from PWGSC also asks suppliers to change the format in which they electronically submit reports on “usage information” to each department they have provided goods and services.